Cash Flow Issues? 3 Debt Collection Techniques That Will Improve Your Business’ Bottom Line

Effective debt collection techniques are necessary for any business, regardless of the economic climate. Knowing how to get your customers to pay their past due debts on time will increase your cash flow. After all, running a business, you have your own debts to pay. Absent an adequate cash flow, you risk falling behind on your own obligations, which leads to problems with suppliers, and/or loss of easy credit terms with your bank or lender.

Learning how to master your debt collection techniques can mean the difference between surviving and thriving for your business.

Here are the top 3 debt collection techniques to improve your business cash flow:

1. Change Your Payment Terms

Be sure to state clearly on all your invoices and any provided quotes what your payment terms are. Many businesses permit 30-60 days before payment is due. Perhaps you should consider reducing the payment terms to 14 days, or 21 days.

Amending your terms of payment can mean the possibility of receiving your money sooner rather than later. It can also mean that an unpaid account becomes delinquent within a month. You are within your rights to start collection activities before more precious time has passed.

2. Written Statement Reminders & Follow Up Calls

Once an account becomes delinquent, you can send a reminder notice to the customer to encourage them to pay their bill. This needs to be worded gently, and carefully in your letter, since the laws regarding debt collection techniques are very specific. Sending written correspondence also means you now have a record of your attempts to collect the past due debt in case future issues come up.

You should also call the customer and remind them of their delinquent debt, and to establish an estimated time frame to effect payment. Again, be careful in your communications, choice of wording, as well as the timing of your call.

Under the Fair Debt Collection Practices Act (FDCPA), debtors are afforded certain protections. Make sure you follow these laws and guidelines, whichever methods of contact you choose.

3. Third Party Collection Agencies

Sometimes, in spite of all your efforts, some of your customers won’t pay their debts. In spite of the fact some of your customers might be experiencing financial setbacks, this doesn’t help your business if they’ve already received goods or services from you in good faith, and now are unable to pay the bill.

The 4 Questions- Loving the Recession

Look — when business, or life, is humming merrily along, we never get the chance (or more accurately take the chance) to stop and reassess. What’s working? What isn’t? How’s that “work of art” coming along, anyway? If I knew I were going to die one year from today, would I continue to live the way I’m living now?

There’s an old Zen parable that goes something like this: The monk approaches the master to ask, “What’s the secret to a happy, fulfilled life?” The master replies: “An appropriate response.”

In any given moment, in any given economic catastrophe, in any given lifetime, you choose your response. Now, I haven’t totally drunk the Kool-Aid of “The Secret” (aka the Law of Attraction) — i.e. “you can get anything you want as long as you want it hard enough.” Tell that to a ballerina who wants a career in the NFL. External factors do have an impact on the realization of our dreams.

But few of us realize how much potential we do have to — as Thoreau said — “elevate our lives by conscious endeavor.” Fewer still live that awareness. Right there is the gold mine in the economic meltdown.

Creating That Work of Art

I had my best year ever in 2008, building on my best year ever before that, in 2007. And now, here in 2009, the bottom has dropped out.

As a personal/executive coach, I keep telling myself, “If my ‘response’ to this challenge doesn’t rise to what I’d advise my clients — if it doesn’t focus on possibility and opportunity — maybe I oughta get out of this biz. Ya know, ‘Physician, heal thyself’?”

So I set to work. And I hope my process can inspire you to help yourself, or someone you love, to move powerfully forward in this crazy time.

I started by noticing that suddenly I have more discretionary time (duh!) than I’ve had in a long time. Emphasis on “discretionary” — as in, I get to choose. In other words, more freedom, more opportunity.

Sure, there’s an underlying context of fear and anxiety. I’m not pretending it’s not there. But I also don’t have to be a slave to it. Again, I get to choose. What’s the point of dwelling on fear and anxiety, if I can choose to dwell elsewhere?

The 4 Questions

So then I asked myself four questions that I know (as a trained professional coach — don’t try this at home) are critical to moving your life forward with integrity and power.

While I was busy with all those great clients, I didn’t have the time to ask myself these four critical questions. But they’re important — they allow me to spend time mapping out the future that’s calling to me, rather than spending time just reacting to the next deadline.

First, What are my core values? In other words, what does my life stand for? There’s any number of exercises you can do to answer that question. One simple one: the nonprofit Center for Ethical Leadership’s Core Values Exercise. It’s free on their website.

Your values are your fuel; they propel you. But toward what? As somebody once said, “If you don’t know where you’re going, any road will get you there.” You need a destination. That’s what vision is for.

Your vision is your North Star. Doesn’t matter if you ever get there. As long as you’re heading diligently in that direction, your life has meaning.

Hence, the second question: “What’s my vision for myself (or my business)?” Make it concrete. Be able to see it, feel it, hear it. The answer wants to be ambitious enough to require some courage and some diligence to get there, but not so ambitious that it feels hopelessly out of reach. This process is pure creativity — you’re the artist; your life is the medium.